Get a mortgage based on the cash flow generated by an investment property rather than through proof of income and employment status.
Instead, we calculate the amount of cash flow you’ll receive from the rental income of the property to pay for the outstanding monthly debt. Typically, such properties are 1-4 rental units (with each unit housing a single family) but can be as large as 10 units. You might also hear the term “non-QM” used when describing DSCR loans. This stands for a non-qualified mortgage, which simply means that the lending criteria are different from a conventional loan—it’s based primarily on the cash flow potential of the mortgaged property rather than on your financial situation. Qualification rules and underwriting guidelines allow us to customize your loan specifically catered to your requirements.
Until relatively recently, DSCR loans were only available for commercial property. But now they can be underwritten for residential units as well.
The calculation used to determine the size of the loan is made by dividing the monthly rental income minus expenses (known as net operating income, or NOI) by the mortgage payment. This provides you with a ratio, which equals the DSCR. Any ratio higher than 1:20 is likely to lead to approval. Of course, the higher the second number, the better.
Because this calculation is relatively simple and doesn’t require any proof of regular income, tax returns, etc., we can approve the process in a much shorter timescale than for a conventional loan. The assessment only takes that property into account, therefore it’s beneficial for investors who might not meet the criteria for a traditional investment mortgage.
Our application process is pretty painless. Once you’ve sourced your investment property, you’ll need to accurately detail the financials surrounding the potential rental.
This will include:
We’ll assess these, determine the property’s NOI, and calculate the DSCR ratio. If the figure is favorable, then the loan will be made available to you straight away. The whole process can take as little as 21 days to complete.
DSCR loans are a great way to start or increase your rental property portfolio without providing information about your net worth and/or employment information. For example, those who are:
DSCR is calculated by dividing the NOI (net operating income) by the debt service of the loan. The resulting ratio is your DSCR.
We consider anything over 1:2 to be good. This allows for an adequate buffer to ensure you can comfortably cover the monthly repayments. But we’re definitely open to looking at exceptional circumstances too.
Because DSCR loans are regulated in a different way from conventional mortgages, we can consider each on its own merits. For example, we might approve a loan with a DSCR of 1:1 or even lower. However, in such a case the down payment and interest rate will increase accordingly.
Borrow anything from $75,000 to $5 million per single DSCR loan, with no maximum number of loans you can have.
Focus on reducing the expenses associated with the property (cut any non-essential costs, improve operational efficiency, etc.). Alternatively, you could improve the rental income, perhaps by increasing the occupancy or furnishing the property to a higher standard.
In a word, no. DSCR loans are only for real estate investment properties.
The average down payment is 20%-25% of the property value.
Yes. As long as the DSCR ratio is adequate and you can fund the required loan deposit, then you’re highly likely to be approved.
Similar to regular investment property lending, the typical minimum is 620. However, we assess each case on its merits.